The Wall Street Journal reports that the “latest urban trend” is “less elbow room” as measured by an increase in accessory units and additional homes built on the lots once occupied by only one home. To illustrate this “trend,” the Journal had to travel to Vancouver, BC, which Wendell Cox ranks as second only to Hong Kong as the least affordable urban area in the English-speaking world.
That lack of affordability, in turn, can be traced to the region’s mindless pursuit of densification via urban-growth boundaries. In other words, this “trend” may actually be just a response to planning-induced housing shortages, not to any real desire of people to double up on individual home sites.
Consider, for example, some other evidence: the Census Bureau says that the average size of homes built in 2012 reached a record 2,340 square feet. More than 40 percent of homes are now built with four bedrooms. Even new condos have reached a record average size of more than 1,400 square feet. The average size of rental apartments, however, is a paltry 1,110 square feet.
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The Millennial generation likes to brag that they live in more energy efficient housing than their elders, but this is only because they live in smaller homes and apartments. Single-family detached homes are actually the most energy efficient housing per square foot (see page 2-5).
Because they are larger, single-family homes use more energy per unit, but the fact that they house more people, on average, than multi-family units makes up for most of the difference. The Department of Energy does not account for energy consumed in the common areas of multi-family housing, which makes up for much of the rest of the difference. Finally, multi-family housing that is taller than three stories requires more steel and concrete in construction, which adds to the life-cycle energy costs of such housing.
If we truly want to save energy and reduce greenhouse gas emissions, it makes more sense to make the kind of housing people want to live in more energy efficient. It’s possible to build single-family homes that use almost no outside energy. While this isn’t necessarily cheap, there are low-cost ways of significantly increasing the energy efficiency of homes. This makes a lot more sense than creating artificial housing shortages and then declaring that increased densities are the latest “trend.”
“the Census Bureau says that the average size of homes built in 2012 reached a record 2,340 square feet”
Man, Dan, you need an addition on your nearly fifth acre to catch up to the average. During my last visit to the parcel viewer, and a background check on the owner’s name, is it possible that you need such a big house because you still live with mommie? OK, I’m distorting. Mommie-in-law. Does she live in the basement or do you? Or can’t you get credit due to your student loans from your failed attempt at an M.A. in Planning? So then you rent from and take care of grandmama? Your life is a British soap! The local school gets terrible scores on greatschools. Tell me why you’re there again? You like a single-digit WalkScore?
Frank –
I think you have made your point very strongly. Maybe you can wait until he irritates you enough again before repeating it again?
Lol nopes. Zoning laws, height restriction, land use regulations, and so on make it illegal for me to built anything other than sprawl. The government create many financial incentives to live in the suburbs like mortgage interest deductions, government guaranteed mortgages, government subsidies to the banking industry, government manipulation of interest rates through the fed, and government monetization of mortages through the federal reserve. The government creates lots of very obvious incentive to live in the suburbs.
“The government create many financial incentives to live in the suburbs like mortgage interest deductions, government guaranteed mortgages, government subsidies to the banking industry, government manipulation of interest rates through the fed, and government monetization of mortages through the federal reserve. The government creates lots of very obvious incentive to live in the suburbs.
Most of these are simply incentives to lend money. The home mortgage interest deduction encourages home ownership, but it is a rather weak incentive. None of these policies explicitly encourages suburban living.
MJ
Encouraging lending or borrrowing or the banking industry is essentially encouraging the housing the industry. The banking industry is essentially a lending house for homes. The banking and housing industry are one. The mortgage interest deduction explicitly favors home ownership how does it not?
The Millennial generation likes to brag that they live in more energy efficient housing than their elders, but this is only because they live in smaller homes and apartments. Single-family detached homes are actually the most energy efficient housing per square foot (see page 2-5).
The logic is getting tangled here. SFHs are more efficient to the extent that they are associated with larger household sizes that, because of family status, can endure conditions that for strangers would be considered intolerable. A ten bedroom SFH with two parents and nine children would be highly energy-efficient due to the sharing of energy-intensive facilities (bathrooms, kitchen, etc), but put ten strangers in that “SFH” and all of the sudden you have a flophouse.
Since 60% of US households are either one or two-person, though, there is a limited market for such large units, and strong demand for studios and one-bedroom apartments where individuals can enjoy some privacy and autonomy (which is what people are ultimately after, I would say, not necessarily a particular type of housing). Apartments tend to skew toward these smaller units because it is a more profitable use of the space, and the higher energy use per square foot therefore reflects the higher land values in the areas where these apartments locate. It is said that SFHs are “the kind of housing people want to live in,” but in my experience, single individuals would much prefer a one-bedroom apartment to sharing a SFH with roommates. If they do the latter it is usually because it is cheaper, not because it is better and certainly not because it is more “energy efficient.”
The banking and housing industry are one. The mortgage interest deduction explicitly favors home ownership how does it not?I
It may nominally favor home ownership, but, as I mentioned, evidence from international comparisons suggests that it has not done much to actually raise home ownership levels above those in other high-income countries without similar policies. And the question of whether it effects housing tenure is quite apart from the question of whether it affects the location of housing.
A ten bedroom SFH with two parents and nine children would be highly energy-efficient
We’ve brought this up here before. SFD is not as efficient as SFA, due to the shared walls. IIRC we’ve also pointed out that the assertion for apartments being energy-inefficient is due to that study where the talking point comes from found rich people living in apartments were the energy-inefficient ones.
DS
MJ
Those things weren’t created for the purpose of moving people into houses before less people lived in houses. Peter Schiff rightly points out that more people are in houses because of these agencies. International examples are irrelevant.
Those things weren’t created for the purpose of moving people into houses before less people lived in houses. Peter Schiff rightly points out that more people are in houses because of these agencies. International examples are irrelevant.
They’re not irrelevant. In fact, they’re necessary. If your argument is that the mortgage interest deduction is causing a significant increase in home ownership levels, then we should see markedly different outcomes in terms of home ownership between higher-income countries that allow the deduction and those that don’t (e.g. Canada). The fact that these differences aren’t large (and possibly zero) suggest that it doesn’t have much of an effect.
+1 for the hilarious Peter Schiff reference.
What constitutes a “subsidy” is often in the eye of the beholder. People seem to forget that the property loan interest on apartments and all maintenance and all improvements are tax deductible as business expenses.
This article ignores the fact that a major reason why the city of Vancouver, Hong Kong, Santa Monica, Manhattan, etc. have such high housing prices is that a large number of people want to live there. How is allowing more development in ex-urban areas far from anything (say Port Coquitlam in the Vancouver area) supposed to reduce the demand that people have for living in an interesting area like central Vancouver? Housing prices are not high in Port Coquitlam, nor are they high in San Bernardino or Palmdale (LA area). Densification is the only way people are able to afford to live in desirable areas. Allowing more SFH in middle New Jersey is not going to affect the desire people have to live in Manhattan.
MJ: From NBER: “The home mortgage interest deduction creates incentives to buy more housing and to become a homeowner, and the case for the deduction rests on social benefits from housing consumption and homeownership.”
PS:
Peter Schiff was right when Krugman and those at the Fed were dead wrong.
MJ is correct in their argumentation – the HMID as currently constructed benefits the top quintile and allows them to consume more housing – it also benefits those in dense cities that have high demand for housing (hence the high price, as transitboy reminds us above). If it were a wide benefit, we’d see more housing consumption. The reason why the lower two quintiles don’t consume more housing instead of choosing to rent is a separate set of threads, surely.
DS
From NBER: “The home mortgage interest deduction creates incentives to buy more housing and to become a homeowner, and the case for the deduction rests on social benefits from housing consumption and homeownership.”
Yes, the theoretical incentive is to increase housing consumption, but what does the evidence say? This, from later in the same abstract:
The irrelevance of the deduction is supported by the time series which shows that the ownership subsidy moves with inflation and has changed significantly between 1960 and today, but the homeownership rate has been essentially constant.
This article ignores the fact that a major reason why the city of Vancouver, Hong Kong, Santa Monica, Manhattan, etc. have such high housing prices is that a large number of people want to live there. How is allowing more development in ex-urban areas far from anything (say Port Coquitlam in the Vancouver area) supposed to reduce the demand that people have for living in an interesting area like central Vancouver?
Are you seriously going to argue that land supply is irrelevant to housing prices in these locations? What is the sound of one demand curve clapping?
Demand is a very strong driver of Ricardian rents, yes.
DS